When the account beneficiary is ready for college your Bright Directions account can be used for a wide range of qualified expenses at eligible institutions.1

These are expenses related to enrollment or attendance at an eligible postsecondary school. As shown in the following list, to be qualified, some of the expenses must be required by the school and some must be incurred by students who are enrolled at least half-time, defined later.

  1. The following expenses must be required for enrollment or attendance of a designated beneficiary at an eligible postsecondary school.
    1. Tuition and fees.
    2. Books, supplies, and equipment.
  2. Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible post-secondary school.
  3. Expenses for room and board must be incurred by students who are enrolled at least half-time (defined below).The expense for room and board qualifies only to the extent that it isn’t more than the greater of the following two amounts.
    1. The allowance for room and board, as determined by the school, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student.
    2. The actual amount charged if the student is residing in housing owned or operated by the school.

    You may need to contact the eligible educational institution for qualified room and board costs.

  4. The purchase of computer or peripheral equipment, computer software, or Internet access and related services if it’s to be used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible postsecondary school. (This doesn’t include expenses for computer software for sports, games, or hobbies unless the software is predominantly educational in nature.)

Half-time student. A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled.

K-12 Expenses. Federal law, but not Illinois law, permits an aggregate of up to $10,000 during a taxable year from all 529 qualified tuition programs for a Beneficiary to be used for tuition or connection with the Beneficiary’s enrollment or attendance at an elementary or secondary public, private or religious school. Such a distribution would be an Illinois Nonqualified Withdrawal and the amount of any deduction previously taken for Illinois income tax purposes (or a portion of such amount) would be added back to Illinois taxable income. Consult with your tax or legal advisor before making such distributions.

The earnings portion of a nonqualified withdrawal may be subject to federal and state income taxes, a 10 percent federal tax penalty, and Illinois may recapture prior tax deduction benefits. Please consult your tax advisor.

View IRS Publication 970 for additional details.

*CAUTION – Illinois Qualified Expenses do not include expenses for:

  1. tuition in connection with the Beneficiary’s enrollment or attendance at an elementary or secondary public, private, or religious school. The amount of cash distributions for such expenses from all 529 qualified tuition programs with respect to a Beneficiary shall, in the aggregate, not exceed $10,000 during the taxable year;
  2. tuition, fees, books, supplies, and equipment required for participation in an Apprenticeship Program;
  3. payments on Qualified Education Loans of the Beneficiary or a sibling of the Beneficiary, subject to a $10,000 aggregate limit.

If a withdrawal is made for such purposes it may be a Federal Qualified Withdrawal and not be included in income for federal and Illinois purposes, but if an Illinois income tax deduction was previously claimed for Contributions to the Account all or part of that deduction may be added back to income for Illinois income tax purposes.

Please consult with your tax advisor.

Funds can be used at any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education. It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. The educational institution should be able to tell you if it is an eligible educational institution.

Certain educational institutions located outside the United States also participate in the U.S. Department of Education’s Federal Student Aid (FSA) programs.

If you receive a refund from an Eligible Educational Institution for Qualified Higher Education Expenses that were paid from money withdrawn from your Account, you can:

  1. Pay For Other Qualified Higher Education Expenses – you can use the funds to pay other Qualified Higher Education Expenses incurred by that Beneficiary in the same calendar year.
  2. Recontribute Refunded Amounts to a 529 Account – if a student receives a refund of Qualified Higher Education Expenses that were treated as paid by a 529 distribution, the student can recontribute these amounts into any 529 account for which they are the beneficiary within 60 days after the date of the refund.  The amount recontributed cannot exceed the amount of the refund.
    • EXTENSION OF TIME – for refunds made on or after February 1, 2020 and prior to May 16, 2020 the IRS has extended the time to recontribute funds to the greater of 60 days or July 15, 2020.

You should consult with your financial, tax or other advisor regarding your individual situation.

Money from a Bright Directions account can be paid directly to the account owner, directly to the beneficiary, to the account owner’s bank account, or to an eligible educational institution.

Payments to account owners, beneficiaries, and bank accounts
An account owner or custodian (under a state UGMA/UTMA) may request a withdrawal online or by downloading and submitting the Withdrawal Request Form.

Be sure to plan ahead when requesting a withdrawal. Generally, if a request is received in good order on a business day prior to the close of the markets (typically 3 p.m., central time), the investments will be sold at that day’s closing prices, and a check will be mailed the following business day. Please plan ahead and allow sufficient mail time. For withdrawals payable to the account owner’s bank account, please allow several business days for your bank to process the payment and credit your account.

Payments to eligible institutions
Bright Directions can also make payments directly to a college or university. Please note that some institutions may take up to three to seven business days to post payments to a student account. Please allow sufficient time for mail time and processing by the school.

The tax benefits afforded to 529 plans must be coordinated with other programs designed to provide tax benefits for meeting higher education expenses in order to avoid the duplication of such ben­efits. You should consult with a qualified tax advisor with respect to the various education benefits.

Taxable Portion of a Distribution
The part of a distribution representing the amount paid or contrib­uted to a qualified tuition program doesn’t have to be included as income. This is